Is Recursion Pharmaceuticals (RXRX) Mispriced After Volatile Share Performance And Ongoing Tech Partnerships

• If you are wondering whether Recursion Pharmaceuticals' current share price really lines up with its underlying potential, you are not alone.
• The stock last closed at US$4.37, with a 6.3% gain over the past 7 days, a 7.2% decline over 30 days, a 4.0% return year to date, and a 41.7% decline over 1 year, which gives a mixed picture of both interest and risk.
• Recent news coverage has focused on Recursion Pharmaceuticals' position in applying technology to drug discovery and its partnerships in the biopharma space, which helps explain why sentiment can swing quickly. These developments have kept the stock on the radar of investors who are attentive to early stage platforms in pharmaceuticals and biotech.
• On Simply Wall St's valuation checks, Recursion Pharmaceuticals scores a 4 out of 6. Next, we will look at how traditional valuation methods stack up for the stock, and then finish with a different way to think about what its price might be telling you.

Find out why Recursion Pharmaceuticals's -41.7% return over the last year is lagging behind its peers.

Approach 1: Recursion Pharmaceuticals Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business might be worth today by projecting its future cash flows and discounting them back to the present.

For Recursion Pharmaceuticals, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is a loss of about $453.7 million. Analysts and model estimates then project how that free cash flow could evolve, with ten year projections ranging from a loss of $17.5 million in 2026 to positive free cash flow of $287.8 million in 2035, all in $.

When those projected cash flows are discounted back to today, Simply Wall St arrives at an estimated intrinsic value of about $9.36 per share. Against a recent share price of $4.37, this implies the stock is 53.3% undervalued according to this DCF model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Recursion Pharmaceuticals is undervalued by 53.3%. Track this in your watchlist or portfolio, or discover 878 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Recursion Pharmaceuticals.

Approach 2: Recursion Pharmaceuticals Price vs Book

For companies where earnings can be uneven or negative, the price to book, or P/B, ratio is often a useful cross check because it compares the share price to the accounting value of net assets rather than current profits.

In general, investors tend to accept a higher P/B ratio when they expect stronger growth, higher returns on capital, or lower perceived risk, and a lower P/B when growth is uncertain or risks are higher. So a “normal” P/B is not a fixed number; it depends on what investors think the business can do over time and how confident they feel about those expectations.

Recursion Pharmaceuticals currently trades on a P/B of about 2.17x. This sits below the broader Biotechs industry average P/B of 2.68x and also below the reported peer group average of 64.51x, which is very high. Simply Wall St also uses a proprietary “Fair Ratio” framework, which estimates what a reasonable P/B might be after considering factors such as earnings growth, industry, profit margin, market cap and company specific risks. This Fair Ratio can be more informative than a simple comparison with peers or the industry because it adjusts for those company characteristics. Based on that Fair Ratio versus the current 2.17x P/B, Recursion Pharmaceuticals screens as undervalued on this measure.

Result: UNDERVALUED

P/B ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1456 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Recursion Pharmaceuticals Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simple stories you build around your own assumptions for future revenue, earnings, margins and fair value. You then link that story to a financial forecast and finally compare your Fair Value to today’s price to decide whether Recursion Pharmaceuticals looks attractive or expensive. All of this is done inside the Narratives tool on Simply Wall St’s Community page, where these views are updated automatically when new earnings or news arrive. Different investors can, for example, see Recursion Pharmaceuticals as worth US$10.00 in a very optimistic Narrative or US$3.00 in a more cautious one, using the same public information but drawing different conclusions.

Do you think there's more to the story for Recursion Pharmaceuticals? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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